25/09/2025 Market Watch

Traders Await Fresh Catalysts

Key Takeaways:

  • Dollar trades narrowly with softer bias against most G10 peers except the Swiss franc and Canadian dollar.
  • US launches Section 232 investigation into robotics, industrial machinery, and medical devices.
  • White House signals possible permanent layoffs in a shutdown scenario.
  • Equities mixed, with Asia showing some resilience while Europe remains weaker.
  • Treasury yields slightly softer near 4.13%-4.14%, with $44 bln in seven-year notes and $185 bln in bills on auction.
  • Gold steadies near $3754 after Tuesday’s record high near $3791.
  • Oil holds above the 200-day moving average, November WTI near $65.

The foreign exchange market remains subdued, with the dollar trading within narrow ranges. A softer bias is seen against most G10 currencies, though the Swiss franc and Canadian dollar buck the trend. With few headlines driving sentiment, participants appear to be waiting for the North American session to set the tone. The US government announced a new trade investigation under Section 232 into robotics, industrial machinery, and medical devices. The process could extend up to 270 days, potentially influencing global supply chains. Separately, the White House budget office is reportedly preparing for large-scale permanent layoffs in the event of a government shutdown. Historically, nonessential federal workers are furloughed, but this time nearly 40% of the workforce could face permanent dismissal.

Global equity performance is mixed. Wall Street losses weighed on sentiment, though Japan, China’s CSI 300, and Australia bucked the trend in Asia. In Europe, the Stoxx 600 fell around 0.40% after a smaller decline yesterday. US futures are little changed but tilted lower. Bond markets show little momentum, with European benchmark yields narrowly mixed and the US 10-year Treasury yield slipping to around 4.13%-4.14%.

Commodities are regaining ground. Gold trades near $3754, recovering roughly half of yesterday’s decline, though still shy of its record high of $3791 set earlier this week. Oil remains supported, with November WTI holding just below $65, above its 200-day moving average near $64.35. Market participants will also watch today’s Treasury auctions of $44 bln in seven-year notes and $185 bln in bills for signs of investor appetite.

United States of America

Overview

The Dollar Index gained for the first time this week, moving toward the 97.90 level. Trading remains within a narrow band of 97.75-97.90, with immediate support at 97.60. If that level holds, the next target is 98.25, with stronger resistance seen near 98.70. Today brings a heavy flow of US economic data, including advance trade figures and preliminary durable goods orders for August. While the revision of Q2 GDP is expected to have little market impact, jobless claims remain crucial due to ongoing labor market concerns.

The Treasury will complete its weekly issuance with $185 bln in bills and a $44 bln seven-year note auction. Beyond data, monetary policy watchers will pay attention to speeches from at least eight Federal Reserve officials. These include both hawkish and dovish voices, with Dallas Fed President Logan expected to provide insight into balance sheet strategy and quantitative tightening.

Economic Drivers

  • Labor market remains central to market focus, with jobless claims closely monitored.
  • Fed communication continues to influence sentiment, with balance sheet reduction under scrutiny.
  • Treasury supply pressures from bill and note auctions shape yields and liquidity conditions.
  • Broader US stance on global strategic risk shows limited economic concern over Argentina, seen more as ideological than systemic.

Data and Events

  1. 25 September 2025: Final GDP
  2. 25 September 2025: Unemployment Claims
  3. 25 September 2025: Durable Goods
  4. 25 September 2025: Existing Home Sales

Price Action

  • Dollar Index range set between 97.75-97.90, with support at 97.60.
  • Break above 98.25 could trigger a move toward resistance near 98.70.

Key Points:

  • Dollar Index consolidates near the week’s highs.
  • Jobless claims seen as the most impactful release today.
  • Fed officials’ comments remain a key driver of sentiment.
  • Treasury auctions could add short-term volatility.
  • Argentina viewed as an ideological rather than systemic risk.

Europe

Overview

The euro recently touched a four-year high near $1.1920 before retreating to end last week around $1.1745. Selling pressure resumed after a brief consolidation earlier in the week, with the currency falling to nearly $1.1725. It is now holding in a tight range between $1.1730 and $1.1755. Support lies near $1.17, and a break of that level could see the euro slide further toward $1.1655. The modest widening of the US-German two-year yield spread, coupled with soft momentum signals, adds weight to the bearish bias in the near term.

On the policy side, the European Central Bank remains cautious. Lending data shows continued firmness, suggesting little urgency for another rate cut. Eurozone money supply growth, however, slowed to 2.9%, the weakest pace since last July. While the figure has lost much of its past market significance, it still adds to the narrative of subdued liquidity growth. Risks to the outlook remain external, with possible US tariff measures and Russia’s disruptive activities in central Europe capable of altering policy expectations.

Economic Drivers

  • US-German two-year yield spread widened modestly, adding pressure on the euro.
  • Lending to households and businesses improved, reducing the likelihood of further ECB rate cuts.
  • Eurozone money supply growth slowed to 2.9%, the weakest since July last year.
  • Potential US tariffs on pharmaceuticals and Russia’s disruptive tactics in central Europe pose downside risks.

Data and Events

No major economic releases are scheduled today.

Price Action

  • Euro consolidates between $1.1730 and $1.1755.
  • Support is near $1.17, with a potential move toward $1.1655 if broken.
  • Resistance remains at last week’s high near $1.1920.

Key Points:

  • Euro weakened after peaking at a four-year high.
  • Yield spread movements support further downside pressure.
  • Lending remains firm, limiting scope for ECB easing.
  • Money supply growth slowed but carries limited market weight.
  • External risks from US trade policy and Russia remain a concern.

United Kingdom

Overview

Sterling came under renewed selling pressure after a brief consolidation earlier this week, falling close to 1.3425, its weakest level since early September following the US employment report. The currency has since managed to hold above that low but struggled to rise meaningfully, with trading capped near $1.3465 today. A decisive break below 1.3420 would raise the risk of further losses toward 1.3365, with the monthly low near 1.3335 coming into view.

The weakness reflects both external and domestic pressures. Short-term market positioning and a stronger dollar continue to weigh on the pound, while uncertainty surrounding the UK’s economic outlook and the government’s fiscal promises is adding to investor caution. Bond markets also highlight unease, as a weak reception to the latest Gilt auction raised questions about demand for UK debt. Despite this, the government is pressing ahead with plans to raise an additional GBP2 bln, including GBP1.25 bln in nine-year bonds already sold and GBP750 mln in 13-year bonds scheduled for sale.

Economic Drivers

  • Firmer US dollar and short-term market positioning pressuring sterling.
  • Concerns over the UK’s economic outlook and government fiscal commitments.
  • Weak demand at recent Gilt auction signals investor caution toward UK debt.
  • Ongoing debt issuance adds supply pressure on bond markets.

Data and Events

No major economic releases are scheduled today.

Price Action

  • Sterling tested lows near 1.3425, holding just above key support.
  • Break below 1.3420 risks extension toward 1.3365, with monthly low at 1.3335.
  • Upside remains capped near $1.3465 in current trading.

Key Points:

  • Sterling under pressure from stronger dollar and domestic concerns.
  • Currency trading near multi-week lows with limited upside momentum.
  • Fiscal outlook and weak bond demand weigh on investor confidence.
  • UK pressing ahead with GBP2 bln Gilt issuance despite cautious reception.

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